1 A Primer on Employment Agreements for Physicians MMA First Fridays Presentation April 4, 2014 Gordon H. Smith, Esq.

2 What is a “contract?” An agreement between 2 or more persons which creates an obligation to do or not to do a particular thing. Its essentials are: –Competent parties –Subject matter –A legal consideration –Mutuality of agreement –Mutuality of obligation Black’s Law Dictionary, 5 th Edition

3 Employment Law 101 Employment “at will” is the common law presumption in all 50 states, meaning that the employment relationship is terminable by either party at any time Affected by variety of specific state or federal statutes protecting employee rights, such as Title VII of the Civil Rights Act of 1964, the Maine Human Rights Act, FMLA, ADA, FLSA, ADEA, PDA, & Equal Pay Act Employers & prospective employees are free to negotiate “employment agreements”

4 Employment Agreement Key Terms Parties Duties & Responsibilities Compensation/base & incentive Fringe benefits Ownership opportunities Term & termination Restrictive covenant/non-compete clause Professional liability insurance Indemnification Other

5 Parties Hospital: non-profit, tax exempt corporation Group practice: business corporation, professional corporation, or limited liability company Individual physician: sole proprietorship or professional corporation; John Doe, M.D. v. John Doe, M.D., P.A.

6 Duties & Responsibilities Physician services within legal & ethical guidelines Location(s) Work Schedule Call schedule Administrative duties “Professional judgment” – degree of autonomy Credentialing requirements – payers & hospital(s) Hospital/Medical staff bylaws “Moonlighting”

7 Compensation Base: may be guaranteed for first year, then may be based upon productivity Incentive: based upon productivity Common benchmark: Medical Group Management Association (MGMA) Annual Productivity & Compensation Surveys

8 Fringe Benefits Health insurance coverage Life/disability insurance coverage Retirement plan Vacation or “paid time off” (PTO) CME Moving expenses Loan repayment

9 Ownership Opportunities May be relevant for private group practice, but not for hospital employment Criteria: timeframe & productivity requirements?

10 Term & Termination Term: initial term may be for specific number of years; may provide for automatic renewal, sometimes called an “evergreen” provision Termination: –Upon period of notice (such as 90 days) by either party for any or no reason –For “cause” with or without notice – material breach of agreement; loss of license

11 Restrictive Covenant/Non- Compete Clause Provision limiting a professional’s right to practice in the geographic region of the employer for a period of time Frowned upon by AMA Code of Medical Ethics because reduces availability of medical care to the public – Opinion 9.02, Restrictive Covenants and the Practice of Medicine Enforceable in Maine if reasonable in duration, geographic area, & interests to be protected – Brignull v. Albert, a 1995 Maine Supreme Judicial Court decision regarding optometrists in the Ellsworth area Liquidated damages provision

12 Professional Liability Insurance Provided for work within scope of employment agreement “Moonlighting” not covered Maine’s “Good Samaritan” statute, 24 M.R.S.A. section 2904, recently expanded Since policies are “claims made” need “tail” coverage upon termination of employment

13 Indemnification “To save harmless; to secure against loss or damage.” Often for negligent acts or omissions Scope should be reasonable In the health care setting - for false or fraudulent claims

14 Other Ownership of/access to patient medical records Dispute resolution

15 Other Employment Law Resources MMA contract review service: flat fee $350 for written analysis Referral to appropriate member of the private bar For physician members or PA members of Maine Association of Physician Assistants (MEAPA) MMA attorneys do not “negotiate” on behalf of members

16 Questions? Gordon H. Smith, Esq. Executive Vice President Maine Medical Association , ext. 216